General Purpose Technologies as Systematic Risk in Global Stock Markets.

General purpose technologies (GPTs)—a class of technologies with pervasive impacts on the economy and spillover across countries—are a source of nondiversifiable risk in international equity markets. An empirical GPT factor from patent data can explain a substantial fraction of the cross‐sectional variation of global stock returns using the new econometric methodology developed by Kan, Robotti, and Shanken (2013). Moreover, the GPT factor is distinct from total factor productivity and other macrofactors in our tests. Our results suggest that a considerable degree of financial market integration may be attributable to technology diffusion as an underlying mechanism. [ABSTRACT FROM AUTHOR]